CK Asset Posts 2% Profit Rise as Asset Disposals Replace Home Sales

Li Ka-shing’s CK Asset Holdings reported a 2022 profit attributable to shareholders of HK$21.7 billion (now $2.8 billion), up 2 percent from a year earlier, as big-ticket divestments of properties in London and Shanghai buoyed earnings.

Revenue from property sales (including shares of joint ventures) fell nearly 32 percent to HK$25.8 billion, weighed down by a 54 percent plunge in mainland China’s contribution, the developer controlled by Hong Kong’s richest man said Thursday in a stock exchange filing.

Contribution from property rentals fell 12.7 percent to HK$5.8 billion — partly owing to rental income loss from the $1.6 billion disposal of 5 Broadgate in the first half of 2022 — but the sale of UBS’s City of London headquarters enabled CK Asset to book a gain and reallocate capital to new investments.

“Despite the global pandemic and market turbulence in recent years, the group has navigated through difficulties and captured timely opportunities in different economic phases of market cycles, which is a testament to the group’s privilege to select its investments among a world of possibilities,” chairman Victor Li said in the filing.

Cashing Out of Broadgate, City Link

The sale of 5 Broadgate, a 13-storey office building near Finsbury, to South Korea’s National Pension Service netted CK Asset a HK$738 million surplus, the developer said.

CK Asset had purchased the property from Singapore sovereign wealth fund GIC and local builder British Land for £1 billion in mid-2018, shortly after Victor Li took over the chairmanship of the company from his father. Factoring in hedging profits, rental income throughout the holding period and the appreciation of the property value over the original cost, the return on investment for the disposal was HK$4.8 billion, CK Asset said last March.

The company also completed its sale of the City Link commercial building in Shanghai’s Jing An district in the first half of 2022 and recognised the related contribution. Hysan Development bought the 24-storey tower at 668 and 688 Xinzha Road for RMB 3.5 billion ($540 million).

CK Asset’s other cash-raising activities included the divestment of the mixed-use Stars of Kovan project in Singapore for S$88 million ($63.8 million) to Fortune REIT, as well as the HK$20.8 billion sale of the developer’s interest in the 21 Borrett Road project in Hong Kong’s Mid-Levels to Sino Suisse — though the latter transaction is due to be completed in 2025.

Replenished Pipeline

In 2021 and 2022, CK Asset spent more than HK$30 billion to acquire four sites through government tenders and two redevelopment projects as it sought to refill its project pipeline in Hong Kong.

The company’s latest buys in the second half of 2022 were a residential development site in Tuen Mun (HK$4.6 billion), a redevelopment project in Sai Ying Pun (HK$1.16 billion) and a residential and retail development site in Kai Tak (HK$8.7 billion).

In his chairman’s statement, Victor Li said Hong Kong would continue to enjoy its “unique advantage” as a gateway between mainland China and the rest of the world despite the territory’s economic recession last year.

“While the Hong Kong property market has been under pressure due to rate hikes, the sector is still underpinned by solid demand,” he said. “Housing policies and interest rate movements will continue to be determining factors.”